Minority-Owned Businesses Grew at Fast Rate From 2002-2007

The number of minority-owned businesses grew nearly 46% between 2002 and 2007, more than twice the rate of all U.S. businesses, according to a new U.S. Census Bureau’s survey of business owners.

The survey, taken every five years and closely watched by industry groups, economists and public policy experts, also showed that companies owned by minorities tend to be smaller and account for a relatively tiny portion of all U.S. companies.

“We must continue to close this gap,” said David Hinson, national director of the Minority Business Development Agency in the U.S. Department of Commerce. While the Census snapshot was for 2007 — before the financial crisis hit — Mr. Hinson called it “unacceptable, particularly during an economic crisis that disproportionately affects the minority business community, to have this ongoing disparity.”

Still, Mr. Hinson said he was encouraged by data showing that minority companies have been hiring at a faster rate than non-minority companies — up 27% over the five years compared with 2.3% growth for white-owned companies, according to the Census numbers.

The Census Bureau reported that the number of black-owned businesses grew 61% to 1.9 million; the number of Hispanic-owned businesses grew by 44% to 2.3 million; and the number of Asian-owned businesses grew by 41% to 1.6 million. The number of white-owned businesses rose 14% to 22.6 million over the same period.

Revenues for minority-owned businesses in 2007 averaged $179,000, a number Mr. Hinson called “paltry” compared with the $490,000 average for non-minority firms. Black-owned businesses saw average revenues of $72,000 in 2007, down from $74,000 in 2002, he said.

The total revenues for all minority owned businesses rose 55.6% over the five year period to $1 trillion in 2007, a small number compared with the $30.2 trillion total for all U.S. companies, the report said.

At the National Black Chamber of Commerce, President and CEO Harry Alford said that focusing on the size of minority-owned businesses is looking at the glass half empty instead of half full. “The overwhelming effect is there are more dollars and more businesses out there,” he said.

But he said that black-owned companies are facing particular problems getting traditional bank loans since the financial crisis – a period that is not reflected in the Census report.

“People of color have a harder time accessing capital,” said Betsy Zeidman, director of the Center for Emerging Domestic Markets at the Milken Institute. The credit crunch has restricted lending for businesses across the board, evidence suggests minorities have been hit harder, partly because their businesses tend to be smaller, she said.

Mr. Hinson said that there’s another reason: Many minorities have used their homes as collateral for their businesses. “As home-equity values dropped, so went their collateral,” he said.

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